The pound weakened against the euro for a fifth consecutive day

The pound weakened against the euro for a fifth consecutive day amid speculation that the Bank of England won’t raise interest rates this year as the European Central Bank continues to tighten monetary policy.

Sterling headed for weekly declines against 13 of its 16 major peers. Money market traders are betting the U.K. central bank will keep its benchmark rate at a record low through February, according to sterling overnight interbank average forwards. The ECB raised borrowing costs by 25 basis points and will increase them by a further 50 basis points by the end of the year, according to a Bloomberg economist survey.

“The ECB is vigilant on inflation and that’s a depressive influence on sterling,” said Jane Foley, a senior currency strategist at Rabobank International in London. “There is a risk that sterling could weaken as we go into summer because of the risk that the European Central Bank will hike again.”

The pound depreciated 0.1 percent against the euro to 88.21 pence as of 9:15 a.m. in London. It reached 88.45 pence yesterday, the weakest since May 6. It was less than 0.1 percent stronger at $1.6251 and little changed at 132.59 yen.

The Bank of England left its key interest rate unchanged at a record low of 0.5 percent this month, even as the fastest inflation in more than two years squeezes household finances. Consumer prices rose an annual 4.5 percent in April, the fastest since October 2008.

Ten-year gilt yields were little changed at 3.39 percent, while two-year yields stayed at 1.01 percent.

Short-sterling futures rose, pushing the implied yield on the contract expiring in June 2012 down two basis points to 1.44 percent, indicating investors pared bets that borrowing costs will rise.

Money markets now price in a 25 basis-point increase in the key rate in February, according to Sonia forwards, Tullett Prebon Plc data show. As recently as February, investors were betting on a rate rise this month.